The Minnesota Senate recently released its budget targets, which describe how they propose using the state’s projected $1.7 billion surplus in the FY 2018-19 budget. The Senate targets allocate $900 million of the surplus to tax cuts, $742 million to net additional general fund spending, and leave $96 million unallocated in FY 2018-19. The targets indicate a similar level of spending and tax cuts in FY 2020-21.
The targets are an important milestone in the budgeting process, and they set the size of the budget omnibus bills that the Senate finance divisions need to put together by March 31.
|Senate General Fund Targets (Net)||FY 2018-19||FY 2020-21|
|Tax Cuts and Aids to Local Governments||$900 million||$1.0 billion|
|Transportation||$400 million||$500 million|
|E-12 Education||$300 million||$435 million|
|Other Bills||$265 million||$25 million|
|Higher Education||$100 million||$100 million|
|Judiciary, Public Safety||$59 million||$68 million|
|Debt Service, Capital Projects||$12 million||$28 million|
|Jobs, Economic Growth||$10 million||$0|
|Veterans, Military Affairs||$1.0 million||$1.0 million|
|Agriculture, Rural Development, Housing||$0||$0|
|Commerce, Consumer Protection||$0||$0|
|State Government||-$30 million||-$30 million|
|Environment, Natural Resources||-$40 million||-$50 million|
|Health and Human Services||-$335 million||-$335 million|
|Net Changes||$1.6 billion||$1.8 billion|
Most of the state’s projected surplus, $900 million, is designated for tax cuts and aids to local governments. Senate fiscal staff indicate that only $40 million of this target will go toward aids and credits.
The targets indicate increased investment primarily in Transportation and E-12 Education.
The Senate’s increased spending in these areas are funded in part by the surplus, but also through a large cut in Health and Human Services. This is disappointing, as the surplus creates an opportunity to invest in Basic Sliding Fee Child Care Assistance after more than a decade of decreased state funding, or boost the Minnesota Family Investment Program’s cash grant, which hasn’t increased in over 30 years. These investments will be much harder to achieve with such a small target.
As policymakers decide how to build the state’s FY 2018-19 budget, we’ve argued they should be cautious because the budget landscape is likely to change significantly as federal policymakers enact large-scale changes over the next year. They should do this by:
- Avoiding large tax cuts that would compromise the state’s ability to provide essential services and respond to federal funding cuts, and
- Maintaining a strong budget reserve to be sure the state is equipped to respond to future economic downturns.
We will be watching closely as the details are filled in, but the Senate targets don’t seem to put us on this path.